The Amendment Act provides clearer guidelines on the scope of taxable capital assets and the entities subject to Capital Gains Tax (“
CGT”).
The definition of “
capital asset” in section 2(1) of the Income Tax Act 1967 (“
the Principal Act”) has been amended. Under the previous definition, “
capital asset” was broadly defined as "
movable or immovable property including any rights or interests thereof." Despite this broad definition, paragraph 38 of Schedule 6 of the Principal Act provided exemptions that limited the scope of taxable capital assets to shares of a company incorporated in Malaysia not listed on a stock exchange and shares of a controlled company incorporated outside of Malaysia under section 15C of the Principal Act.
The amended definition of “
capital asset” stipulates the types of assets subject to CGT. Firstly, CGT will now apply to movable or immovable property situated outside Malaysia; and secondly, for assets within Malaysia, “
capital asset” refers to shares
1 of companies incorporated in Malaysia that are not listed on the stock exchange (including any rights or interests thereof) owned by a company, limited liability partnership, trust body, or co-operative society. In light of the above, paragraph 38 of Schedule 6 of the Principal Act is redundant and has been deleted.
The categories of persons who are subject to CGT on a disposal of shares under section 15C of the Principal Act have also been amended. Previously, gains or profits accruing to a “
person” on the disposal of a capital asset, namely a share
2 of a controlled company incorporated outside Malaysia, were deemed to be derived from Malaysia where the relevant company owns real property situated in Malaysia or shares of another controlled company or both. The term “
person” has now been replaced with “
company, limited liability partnership, trust body, or co-operative society”, thus clarifying that individuals will
not be subject to CGT on a disposal of shares under section 15C. This amendment also aligns the categories of persons who are subject to CGT upon a disposal of shares in foreign incorporated controlled companies with those upon a disposal of shares in unlisted Malaysian incorporated companies.
The definition of “
defined value” for the purpose of a disposal under section 15C is clarified as the market value of real property or the acquisition price of shares of another controlled company, determined under subsection 15C(4).
The specific definition of “
shares” under section 65C of the Principal Act is now deleted. The definition in section 2(1), where, “
share”, in relation to a company, includes stock other than debenture stock, will now apply. In view of the amended definition of “
capital asset”, shares and stocks as aforesaid will include “
any rights or interests thereof”. The deletion of the definition of “
shares” in section 65C means that loan stocks and debentures issued by “
a company or any other corporate body incorporated in Malaysia” will henceforth fall outside the ambit of CGT.
3
Part XXI of Schedule 1 of the Principal Act which sets out the rates of CGT has been amended to be in line with the amended definition of “
capital asset” in section 2(1) of the Principal Act.
The amendments in section 1 of this article came into operation on
21 May 2024.
The Amendment Act also introduces changes to e-invoicing requirements. Businesses eligible to issue consolidated e-invoices were previously required to issue receipts in printed form to buyers. Commencing from 1 January 2024, these receipts may be issued in any manner (e.g. by electronic means).
In addition, e-commerce platform providers are now mandated to issue self-billed invoices according to the conditions set by the Director General of Inland Revenue with effect from 1 January 2024.
The Amendment Act also revises the procedure for estimating tax payable. The amended definition of “revised estimate” in section 107C(12) of the Principal Act gives taxpayers a third opportunity to revise their estimate of tax payable for a year of assessment in the 11th month of the basis period, in addition to revisions that can be made in the 9th or 6th month of the basis period. This change is effective for the year of assessment 2024 and subsequent years of assessment.
It is to be noted that by reason of the exemption orders issued, the CGT provisions in the Principal Act only came into operation on 1 March 2024.
As the amendments to the CGT provisions under the Amendment Act only came into operation on 21 May 2024, disposals of shares (as then defined) from 1 March 2024 to 20 May 2024 would be subject to the provisions of the Principal Act, as originally framed. This means that gains or profits derived from a disposal made during the aforesaid period by an individual of shares under section 15C, or by a non-individual of debentures issued by a body corporate incorporated in Malaysia would be subject to CGT.